Should the government limit the number of university places?

The number of university degrees awarded each year has dramatically increased in the Western world, however it is not necessarily a change for the better. University education is vital for training for highly skilled jobs (e.g. architecture, medicine, engineering) but now more and more students are studying for degrees which do not increase their economic productivity because it has become vital in the search for a job and its attainment is prioritised at the opportunity cost of working sooner or attaining more useful technical training. This serves as reason to suggest these Governments should greatly restrict the number of university places available. However, this comes at a direct cost to the students stopped from receiving higher education – often worsening inequality- and overlooks the important qualitative impacts that university education has which are not measured economically. This essay shall argue that while higher education is becoming less economically efficient, a blanket policy placing a cap on the number of university places would be equally ineffective; instead policy makers and practitioners should target support to ensure graduates closely reflect the economic demands of that society.

Limiting the number of places available at university should be considered given the trend in diminishing marginal returns – in the form of economic output – relative to the increase in degrees awarded. For decades a university degree would correlate to an higher income; however, this “graduate premium” (the additional income a graduate earns for their time in university) is narrowing. The saturated labour market generates fierce competition forcing people to obtain a degree in order to compete and secure a job – thus leading people to study a subject that serves little to no relevance to their eventual career. This is clearly demonstrated in the official graduate labour market statistics, which show that 31% of all graduates are not doing high skilled (or graduate) jobs and are underemployed for their skills. Clearly this current model is economically inefficient as near 1/3 of graduates are losing 3 or more years of potential earnings (and tuition fees) in order to compete with the rest of the labour market.

A limitation of the number of university places available would force these otherwise students to engage in more economically efficient technical training instead. Germany’s experience suggests success for this model, having both abolished tuition fees (meaning a university education comes at no direct cost) and the highest level of technical training in Europe. This seeming contradiction has been the direct result of targeted emphasis on the importance of technical training alternatively – but not instead of – university education. This is plainly evident in a comparison of the proportion of enterprises providing initial vocational training in 2010 in Germany and the UK, at 63% and 17% respectively. As such it hardly comes at a surprise that UK productivity (measured as GDP per hour worked) in 2014 was lower than that of Germany by 36%. This underlines an intrinsic problem with education in the UK for example, where too many people are going to university and not enough are engaged in technical training, making the society economically inefficient. As such, logic dictates a society facing this problem should actively push people out of university by limiting the number of places available.

However limiting available university places incurs the costs of Moral Hazard by restricting potential students’ freedom of choice and equality of opportunity. This means that students who acquire the necessary grades will be unable to receive the proper education they deserve, despite funding it themselves. In 2015 this number in the UK’s capped system was estimated at 60,000. In this way, a limitation of university places serves to increase economic productivity, against the wishes of many of its population.

The importance of university education in a society goes far beyond its obvious economic impact, making a limitation on places for this reason narrow-minded. Increased university education is valuable not merely for increases in quantitate but rather qualitative factors in society. One such example is that of community involvement. The “Education pays” study (2013) showed that the percentage of four-year college graduates who donate their time to organisations was over twice as high as the percentage of high school graduates who volunteer. This is demonstrative of the hidden significance of University education on increasing society’s Standard of Living as a whole. Similarly, research suggests that university graduates are more politically engaged and invested in society given that findings show in the 2012 election 59% of high school graduates and 80% of bachelor degree recipients between the ages of 45 and 64 voted. This is evidence to suggest that university level education encourages people to take a greater personal stake in society.

Furthermore, research has found that capping university places will disproportionately negatively impact the least well off in a given society. The Scottish example illustrates the cost of capping places to their society as a whole. The Sutton Trust’s Access in Scotland study found children from the most disadvantaged areas are 4 times less likely to go to university than those from the wealthiest homes. This compared to only 2.4 times less likely in England and 3 times less likely in Wales and Northern Ireland, where university places are unlimited. The fact that 71% of independent school entrants gained a place in one of the four oldest universities, contrasted with only 29% of state school entrants, shows that those who are most effected by the cap are those attending state schools who on average represent the more disadvantaged members of society. Thus, the Scottish limitation on places to allow for free tuition fees has actually made university less accessible to the poor than before. As such inequality in Scotland becomes a vicious circle as the restriction on university places tends to operate in favour of the more affluent members of a society. Illustratively, an American study found that of the adults who grew up in the bottom family income quintile, 47% of those without a bachelor’s degree remained in the bottom quintile, compared to 10% of those with a four-year college degree. This is one clear example of the problems surrounding a capping of university places, showing it not to be the right solution.

A cap on university place may leave society better off in the short-run given that student loans are picked up by the tax payer. In 2016 it was estimated that 70% of all British graduates would never finish paying their student loans. As increasing rates of people go to university, so increase the number of people who never earn enough to pay back their loan (as their degree was not economically efficient), and as these loans are government backed, the tax payers must subsidise them.

A cap on university places stands to lower the number of all degrees awarded, when in reality the problem is not there being too many graduates, but too many of the wrong subject. The harsh truth, which many nations (particularly the UK in contrast to Germany) have lost sight of, is that not all degrees are equal and do not hold the same worth as one another. In the Labour force survey (2015) it compared degree courses and eventual employment after 6 months, and for example Medicine and dentistry graduates had a 99.6% employment rate, contrasted to Computer science graduates who had an approximate of merely 82%. This reflects the difference in demand for these two degrees and demonstrates that they do not carry equal weight in the UK economy. This is further emphasised in the appreciation of the fact that near all medicine graduates were in professional employment, where as a vast proportion of computer science graduates were working in “non-graduate” employment and were overqualified. A cap on places would undeniably solve this Computer science supply and demand problem in the UK as there would be fewer graduates with a higher proportion of them being paid in professional work, making the economy more efficient. However, with the knowledge, that on average, 11% of medical staff and 26% of all doctors in the UK are non-British, the hypocrisy of such a policy is made evident. The UK undersupplies Medical graduates and supports this buy importing them from overseas. While this is not disastrous (in the short run) for its own economy, it comes at the dire Moral Hazard of contributing to the “Brain Drain” rife in less developed countries. For example, the British Association of Physicians of Indian Origin (BAPIO) estimates that the UK has over 40,000 Indian doctors (who are treating about half the population). This has meant that India’s doctor-patient ratio is 0.6, compared to the UK’s 2.8 which is still low by EU standards, where Germany’s is as high as 4.0. As such, the import of foreign doctors to the UK is both immoral and unsustainable in the long term. Capping the number of university places is not the solution for economic inefficiency. There are not so much too many people getting degrees, but too many people getting the wrong degrees. The government should greatly tighten regulations on the number of places on each course with respect to their value and demand in society.

To best understand if degrees are in excess supply, we need to appreciate how they are in fact supplied. In America, the best institutions are privately funded in a free market, with as a typical case, Medical school tuitions costing $50,000 per year for students at private institutions. Contrastingly, in the UK an English degree (which comes at very little cost to the institution) and a Medical degree (estimated to cost £250,000 per degree in UK) cost the same £9,250 to a domestic student. Arguably, the UK’s already existent tampering in the university system has worsened the degree inflation, positing a case for Government failure. This is as the fixed price level has meant that it is more economical for Universities to supply cheaper courses such as media studies, despite them having limited use to a society. Therefore, it is since medical degrees are state funded that there is a limit to the supply of them, and as such the UK imports a far higher proportion of its medical workforce. Contrastingly at the other end of the spectrum, Germany’s universities are more state controlled with many tuition fees often free and medical degrees costing less than €5,000 in total, and yet their doctors patient ratio is nearly 75% better than that of the US. This questions whether a cap on places is not the right solution, but rather more intimate control over the supply of places could be the best solution for a government.

University education holds a vital place in the heart of modern society. Undeniably, it leads to a more skilled workforce, greater social cohesion and for many of its graduates, improves their standard of living. However, for many countries it has become economically inefficient, with too many people attaining degrees which serve them little purpose. While this is not yet the situation for less economically developed nations, the problems of the US, UK, EU and Asian higher education systems have a ripple effect throughout the entire world. However, the state cannot offer a blanket policy on the number of university places available; it must use customised support in order to produce graduates which closely reflect the economic demands of that given society. Those who miss out on places should be encouraged to fund their own way through university or rather engage in technical training which so many Western nations have let slip under the radar for too long.